‘Deal With Devil’ Marks End to Japan Postwar Era 66 Years After Hiroshima

By Bloomberg News -
Oct 20, 2011

Kazutaka Kikawada ran track and
field at Fukushima’s Yamafunyu Elementary School before becoming
the local boy made good, attending the elite University of Tokyo
and carving out a career that made him president of Tokyo
Electric Power Co.

The school ground where he ran his races a century ago now
has a yellow backhoe digging out topsoil irradiated by the
wrecked nuclear reactors Kikawada approved for construction 60
kilometers (38 miles) away. The dirt is piled under sky-blue
tarpaulins. Graffiti in red and black kanji on the main road
demands Tokyo Electric remove its “radioactive trash.”

“I reckon he brought the nuclear plant to his home
prefecture to create jobs and prosperity,” said Chozo Yamaki,
an 83-year-old who knew Kikawada and still lives and farms
cucumbers on a patch of land across the street from where the
schoolboy runner grew up in the farming hamlet. “It’s tragic it
led to such a crisis.”

Little remembered after his death more than three decades
ago, Kikawada made what he called a “deal with the devil” to
take the utility known as Tepco into nuclear power. That
decision provided energy to Toyota Motor Corp. (7203), Sony Corp. (6758) and
the other companies that built Japan from the devastation of
World War II into the world’s second-largest economy. The
Fukushima disaster came 66 years after the atomic destruction of
Hiroshima and Nagasaki and may mark a turning point in Japan’s
future as fundamental as the bombs that ended the war.

Atomic Devil

Japan’s experience as the only country to be attacked with
atomic weapons made its embrace of nuclear power as unlikely as
its rapid economic recovery. Yet Kikawada wasn’t the only
businessman to conclude that the atomic “devil” could make
that growth possible.

From 1945, Japan based its economic recovery on rebuilding
its power industry, initially with oil and coal and later with a
so-called nuclear village. The term describes a nuclear-
industrial complex comprising utilities and manufacturers
supported by politicians, bureaucrats and academics that
promoted atomic energy to power fast-expanding industries in
steel, shipbuilding, cars and electronics.

“The nuclear village’s core argument is that it offers
low-cost, reliable power essential for a modern and competitive
economy,” Andrew DeWit, a professor of the politics of public
finance at Tokyo’s Rikkyo University, said in an interview.
“But those claims are rapidly losing credibility in the public
debate because after Fukushima the cost of nuclear power has
become greater. The nuclear village is unraveling.”

Hiroshima Bombing

Japan’s development into the world’s third-biggest user of
nuclear energy dates from the last days of the war. Yasuhiro Nakasone, who would later become Prime Minister and a powerful
advocate of atomic energy, was serving as a naval officer in
Japan when Hiroshima was bombed. After the war, he began the
work of persuading the U.S. to sell Japan nuclear technology.

“I strongly felt that Japan should rebuild itself with
science and technology,” Nakasone wrote in his autobiography in
2004. “Japan needed to move with the times or we would be left
behind immediately.”

Despite the stigma attached to anything nuclear in Japan,
there were forceful arguments to pursue it for energy supply and
security.

U.S. fire bombings before Hiroshima and Nagasaki were
concentrated in urban areas and destroyed thermal generators,
grids and transformers, leaving hydropower plants in rural areas
as the main source of energy.

Japan’s Reconstruction

Meanwhile, electricity demand more than doubled to 33.9
billion kilowatt hours from 16.4 billion kilowatt hours in the
five years from 1945 as Japan’s reconstruction took off.

Japan’s interest coincided with U.S. concern about what to
do with its own surplus of weapons-grade plutonium, and the
suspicion that created in the Soviet Union, Laura E. Hein wrote
in “Fueling Growth -- The Energy Revolution and Economic Policy
in Postwar Japan.”

U.S. President Dwight Eisenhower’s solution was the “Atoms
for Peace” program to use U.S. plutonium to provide nuclear
fuel for its allies.

The plan had the advantage of making allies dependent on
technology from corporate giants General Electric Co. (GE) and
Westinghouse, according to Michael Donnelly, a professor of
political science at the University of Toronto who studies
Japan’s nuclear program.

“I can’t believe that any decision of this sort would not
involve consideration that nuclear energy programs would benefit
American manufacturers,” Donnelly said in a phone interview.

CIA Involvement

Still, officials in both the U.S. and Japan had to work on
persuading the public that nuclear technology could have a
civilian use. Nuclear supporters in Japan were helped by the
U.S. Central Intelligence Agency, says Tetsuo Arima, a professor
of media studies at Tokyo’s Waseda University who studied
declassified documents on postwar relations between the two
countries in the U.S. National Archives and Records
Administration to establish the link.

Among the CIA’s Japanese allies in the propaganda effort
was Matsutaro Shoriki, owner of the Yomiuri newspaper and Nippon
Television, Japan’s first commercial TV station. The newspaper -
- now the world’s biggest with 10 million copies published daily
-- wrote a series of pro-nuclear articles from Jan. 1954 viewed
by the U.S. government as a success, according to the book
“Nuclear Power, Shoriki and the CIA,” written by Arima and
published in 2008.

Walt Disney

The Walt Disney Co. (DIS) was also roped into the effort. The
1957 cartoon “Our Friend, The Atom,” released as part of the
company’s Tomorrowland project and depicting the positive
benefits of a world harnessing atomic energy, was run on
Shoriki’s TV channel, Arima wrote.

The Yomiuri newspaper declined to comment on Arima’s book
when contacted by Bloomberg. Arima also declined to comment on
whether the newspaper had responded to his book.

In 1954, Nakasone submitted a bill to parliament to finance
nuclear energy research. Lawmakers set the budget at 235 million
yen after uranium 235, a fuel used in atomic reactors, according
to his autobiography. In 1955, the U.S.-Japan Atomic Energy
Agreement gave Japan the right to buy nuclear fuel and
technology from the U.S.

By September 1956, Shoriki, who was then head of Japan’s
Atomic Energy Commission, announced the country’s long-term plan
for nuclear power, included importing reactors before developing
its own. The Tokai station, the country’s first, was built by
government-backed Japan Atomic Power Co. in the 1960s in Ibaraki
prefecture, northeast of Tokyo.

Intense Pressure

It was into this environment of government-led nuclear
development that Kikawada stepped when he became president of
Tepco in 1961. The company had begun research into atomic energy
and was already looking for potential sites for a reactor in the
late 1950s, according to its official history.

“It was inevitable that we would rely more on nuclear for
future power supply as nuclear fuel needs less foreign currency
than oil,” the official history said.

It was a period of rapid economic expansion in Japan and
employees at the country’s power utilities were under intense
pressure to feed the growth.

The demands on Kikawada were so extreme that when his
mother, Nusa, died in 1950, he arrived in the middle of the
ceremony, kept his taxi waiting outside and left after five or
10 minutes, Yamaki, his neighbor in Yamafunyu, said.

“That was the last time I met him,” Yamaki said. “I dug
Nusa’s grave.”

Planning Fukushima

Fukushima prefecture began working to attract a utility to
build a nuclear plant in the region in 1958, according to Tepco.
Shortly after Kikawada took over, the towns of Okuma and Futaba
agreed to host a nuclear station.

Kikawada, who appears balding in spectacles wearing a
western-style suit and tie in black and white photos, still had
a decision to make.

“Kikawada once said that building a nuclear plant is like
doing a deal with the devil,” Soichiro Tahara, author of
“Documentary, Tokyo Electric,” said in an interview in August.
He changed his mind in part because he didn’t want the
government to control atomic energy after it had led Japan into
a disastrous war, Tahara said.

“If Kikawada had decided to go against nuclear power, the
government would have taken it over,” he said.

Nuclear Obsession

Based on his own writings and commentaries by others,
Kikawada cuts a complex figure. In his autobiography, he credits
Eijiro Kawai, his lecturer in economics and the humanities at
the University of Tokyo, for instilling in him “social
values.”

Kawai was arrested by Japanese authorities and imprisoned
during World War II for his writings calling for a more even
distribution of the country’s wealth.

Yet as head of Japan’s largest utility, Kikawada was also a
pragmatist. With few sources of its own outside coal and
hydropower, energy security had long been an obsession among
Japanese leaders. The U.S. imposition of an oil embargo on Japan
in 1941 led to its decision to attack Pearl Harbor the same
year.

“From its expansionist role in World War II to its
activist industrial policies of the 1970s and 1980s, energy
security has played an important -- and sometimes overriding --
role in Japanese foreign and domestic policy,” according to a
report in 2000 by the James A. Baker III Institute for Public
Policy at Rice University.

Unique Leader

“Kikawada was a unique business leader, combining
capitalism with a social consciousness,” recalls Teruaki Masumoto, a former Tepco vice president who joined the company
in 1962 and served under Kikawada. “Japan had no energy
resources of its own and he saw Tepco’s role as one of enabling
economic development.”

Under his 10-year watch, Tokyo Electric grew to be the
world’s largest private utility, according to “The Nuclear
Barons” by Peter Pringle and James Spigelman, which documents
the growth of the global nuclear power industry. That made him a
key figure in Japan’s search for energy to allow manufacturers
like Toyota, Sony and Hitachi Ltd. (6501) to run their factories and
turn out the products that made them global brand names.

Kikawada did give the go-ahead for the Fukushima Dai-Ichi
plant on the east coast of Japan and construction began in 1967.
The design included a village with a church and elementary
school for the families of engineers from General Electric who
remained until 1979, according to Tepco’s official history.

Golden Era

It was the beginning of a golden era in Japan’s nuclear
power industry. The Atomic Energy Commission in April 1967
unveiled a nuclear plan entailing expansion of power generation
capacity to as much as 40,000 megawatts by 1985, including the
development of overseas uranium mines.

By 2009 Japan had 54 nuclear reactors generating about 30
percent of the country’s electricity. Before the crisis in
March, there were plans for 14 more and a target to generate 53
percent of the country’s power from nuclear plants by 2030.

This rapid development helped spawn Japan’s nuclear
village. Nuclear-related spending by Japan’s utilities was 2.14
trillion yen ($28 billion) in the year ended March 2010, when
45,382 people were directly employed by the industry, according
to the Japan Atomic Industrial Forum.

The nuclear industry also employs tens of thousands of
subcontractors and other support services. When the earthquake
hit the Fukushima Dai-Ichi station on March 11, Tepco had 6,415
people at the site, including 5,500 subcontractors.

Site Fights

Economic trends in the 1970s, when most plants were built
helped persuade local communities to accept nuclear plants so
soon after Hiroshima and Nagasaki, says Daniel Aldrich, an
Associate Professor of Political Science at Purdue University
and author of “Site Fights: Divisive Facilities and Civil
Society in Japan and the West.”

The period saw rapid depopulation of rural areas as more
people sought higher-paid jobs in cities including Osaka and
Tokyo, even as the government increased subsidies and benefits
to farmers to retain levels of food production and the
continuation of rural life.

“In a lot of villages, the nuclear industry was viewed as
a lifeline,” Aldrich said in an interview. “Living in Tokyo,
people could afford to debate issues related to nuclear power
and the risk of radiation. But for people in declining rural
areas, these plants were often seen as the last hope to attract
investment and growth.”

Minamata Disease

Another reason was pollution, according to Tahara, the
author on Tepco. In the 1950s, the so-called Minamata disease
led to the deaths of more than 1,500 people after mercury from a
factory contaminated seafood in Minamata Bay, raising a public
outcry over the health risks from Japan’s industrial
development. The utilities shifted their slogan to “stable
clean energy” from “cheap energy” as they sought approval for
nuclear plants, he said.

Kikawada told Time Magazine in 1971, the year Dai-Ichi
began commercial operations and he became Tepco chairman, that
Japan’s growth had created environmental devastation and risked
causing social disruption. Pollution protesters staged sit-ins
in government offices, the magazine reported at the time.

The proliferation of nuclear power plants in rural areas
around Japan’s coastline also created what’s known as the donut
effect, where villages and towns surrounding stations enjoyed a
prosperity not available to those further away, gaining jobs,
public works projects and a higher standard of living.

Nuclear Ginza

Fukui prefecture, nicknamed the Nuclear Ginza for its 13
nuclear reactors -- the highest concentration in the world --
boasts the nation’s heaviest newborns, biggest houses and most
emergency clinics per person. The building of a plant in Ohi
saved the town from bankruptcy in the 1970s, built a bridge to
connect the Ohi peninsula with the main coastline, created 2,400
jobs and provided capital for a tourism industry, according to
Mayor Shinobu Tokioka.

Omaezaki, southwest of Tokyo, has received a total 26
billion yen in government grants for the five reactors built at
Chubu Electric Power Co.’s Hamaoka plant. That money paved new
roads, upgraded phone lines and funded programs to help the area
attract businesses, in addition to building an elementary
school, a hospital, three preschools, a public pool, a gym and a
library.

Kikawada said he was motivated by the idea of helping rural
areas, writing in the Nikkei newspaper in 1970 that Dai-Ichi
would “contribute to the development of the region.”

Not everybody agreed. About 34 towns and cities in Japan
have rejected nuclear plants since 1961 as opposition grew,
according to the Citizens’ Nuclear Information Center, a Tokyo-
based group.

Rising Japan

Still, the impact of the utilities’ investment in nuclear
power on Japan’s broader economy is hard to ignore. The rise of
Japan’s manufacturers to dominate the global auto and
electronics industries came in lockstep with the promotion of
nuclear energy. Power lines from Fukui’s Nuclear Ginza feed the
industrial heartland of Kansai, an area the size of Belgium
where Sharp Corp. and Panasonic Corp. (6752) have factories, and where
Toshiba Corp. makes the Nand flash chips used in the iPad.

Coupling Japan’s industrial development with atomic power
produced an economic model with the nuclear plant at its center
driving growth, according to Shinichiro Tonooka, a professor at
Tsuruga College in Fukui.

“The overwhelming majority of residents are benefiting
economically from the station even if they’re not directly
involved in engineering projects,” Tonooka said.

Tsunami Cliff

Yet decisions made by utilities in this era were also
laying the groundwork for the catastrophe that engulfed
Fukushima about 40 years later.

Before beginning construction at the Dai-Ichi site, Tepco
lowered the cliff level by 25 meters (82 feet) from its 35 meter
original height, spokesman Naoki Tsunoda said in a phone
interview. According to the Tepco’s application for planning
permission, the reactor buildings were built on bedrock 10
meters above sea level. That made it easier to bring equipment
to the site by sea, but the effect was to lower the cliff below
the level of the tsunami that struck the plant in March.

The industry also dismissed warnings based on advances in
seismology since the 1960s and 1970s when many of Japan’s atomic
plants were built, said Katsuhiko Ishibashi, a seismologist and
former professor in the Research Center for Urban Safety and
Security at Kobe University.

While Tepco had called the 13.1-meter tsunami that hit Dai-
Ichi “unforeseeable,” geological research in the last decade
suggests otherwise. A team of geologists led by Koji Minoura at
Tohoku University found evidence in rock strata that the area
had been hit by three giant tsunamis over 3,000 years.

Big Mistake

Japan’s decline since the bubble economy collapsed in 1990
reduced energy spending, causing utilities to try to cut costs
by scrimping on safety measures, according to Muneo Morokuzu, a
professor of energy, environment and public policy, at the
University of Tokyo who previously worked for Toshiba Corp. (6502) as
an engineer.

“The country that most needed nuclear generation to offset
its lack of domestic natural resources made a big mistake in the
last 20 years,” Morokuzu said in an interview. “A lack of
decisive measures to revitalize the economy prompted utilities
to shift their focus more to their balance sheets.”

Tepco in 2002 admitted it had falsified maintenance reports
at nuclear plants for more than two decades. Chairman Hiroshi Araki and President Nobuya Minami resigned to take
responsibility.

Faked Records

In 2007, the utility said it hadn’t come entirely clean
five years earlier and admitted to concealing at least six
emergency stoppages at Dai-Ichi and a “critical” reaction at
the plant’s No. 3 unit that lasted seven hours.

“Accidents, mishaps, lies, duplicities -- the postwar
landscape of Japan’s nuclear power development is filled with
fiascoes,” the University of Toronto’s Donnelly said.

Amid the accidents and fake safety reports, the underlying
premise that resource-poor Japan had to rely on nuclear power
was rarely questioned by the government, industry or the
country’s bureaucrats.

That changed after March 11 and the evacuation of almost
160,000 people from around the site of the world’s worst nuclear
accident in 25 years.

Regime Cracking

Former Prime Minister Naoto Kan requested the shutdown of
Chubu Electric’s Hamaoka plant citing earthquake risk, sparking
a debate over the suitability of nuclear energy in quake-prone
Japan and putting him on a collision course with the nuclear
village. The conflict was exacerbated when Kan ordered other
plants to remain closed until safety could be assured.

More than 80 percent of Japan’s 54 reactors remain off-
line, with more shutting for scheduled maintenance in the months
ahead.

“If Japan’s nuclear power regime is cracking now it’s
cracking for the first time since 1955,” Donnelly said.

The majority of opinion surveys show Japan’s public now
opposes nuclear power. Sixty percent of respondents to a
Mainichi newspaper poll published on Sept. 20 said they favor
phasing out atomic energy.

Nuclear power was a key policy of the Liberal Democratic
Party, which governed Japan with almost no interruption for 55
years until 2009. Close ties with the government meant
opposition was confined to left-wing parties and the rural towns
where utilities tried and failed to build plants.

Don’t Listen

“The nuclear industry is a very Japanese bureaucracy in
nature, similar to the Japanese army during World War II,” said
Tetsunari Iida, executive director at the Tokyo-based Institute
for Sustainable Energy Policies and a former nuclear industry
official. “They don’t listen to anybody.”

Fukushima has ruptured the usual consensus within Japanese
industry.

Manufacturers have balked at what they assume will be
rising energy prices and shortages. LCD-maker Sharp and Mitsui
Mining & Smelting Co., Japan’s biggest zinc smelter, said they
plan to move some production abroad because of the unreliable
energy supply at home.

Some economists share their concern. Gross domestic product
will fall by 3.6 percent and 200,000 jobs may be eliminated if
all of Japan’s reactors close by next spring, the Tokyo-based
Institute of Energy Economics said in a July report.

The Fukushima disaster has spawned two competing visions
among businesses about the future of Japan’s energy policy. The
first, espoused by the utilities and some manufacturers, says
nuclear power is essential for the economy.

Social Unrest

“The prefecture of Fukui provides 55 percent of the
electricity for the 20 million people of the Kansai area,” the
prefecture’s governor Issei Nishikawa said in an interview.
“Shutting off all of this power would create a different set of
risks, such as sparking social unrest.”

Holders of an alternative view, including Softbank Corp. (9984)
Chief Executive Officer Masayoshi Son, say the utilities should
lose their monopoly over power generation and power distribution
to make way for new companies in solar, wind and geothermal.

It’s a view that is appealing to technology and service
companies more than manufacturers. Hiroshi Mikitani, president
of Japan’s biggest online retailer Rakuten Inc. (4755), quit Keidanren,
the country’s largest business lobby, in protest over what he
said is the group’s support for the status quo.

Renewable Energy

Promoters of renewable energy received a boost under Kan,
who pushed through a bill to introduce a feed-in tariff to
subsidize renewable energy producers. The measure will also
force utilities to purchase renewable energy from providers at a
fixed price.

“Japan originally had the most advanced technology in
renewable energy but other countries got ahead of us because
Japan lacked a legal framework for renewable energy and domestic
demand withered,” Son said in September. “Now that we have a
law in place, Japan will have to catch up.”

The renewable energy lobby faces a massive task to overcome
political support for the utilities even as public opinion turns
against atomic power, according to Taro Kono, a politician with
the opposition Liberal Democratic Party and a critic of what he
calls Japan’s nuclear obsession.

Less than six months after the disaster, the nuclear
village was already pushing back. After calling for Japan to
abandon atomic power, Kan said criticism from power companies,
regulators and politicians that support the industry contributed
to the pressure on him to step down in August.

Power Shortages

Kan’s successor Yoshihiko Noda softened the government’s
stance, telling the public that idled reactors are needed to
save the country’s ailing economy. “It’s important for us to
prepare for restarts,” he said in comments on possible power
shortages next year.

Power companies are also facing higher costs from importing
fossil fuels to replace lost nuclear generation capacity, said
Penn Bowers, a utility analyst with CLSA Asia-Pacific Markets in
Tokyo.

“The utilities certainly can’t meet demand next summer,”
Bowers said at a Bloomberg conference on Japan’s recovery
earlier this week. “The public hasn’t felt the rising costs
yet, but the utilities are taking it on the chin.”

What the government decides to do with Tepco may be the
first indicator of the direction of its new energy policy,
expected to be completed next year.

Botched Response

Shigeaki Koga, a former official at Japan’s Ministry of
Economy, Trade and Industry, which promotes the nuclear
industry, called for Tepco to be placed into bankruptcy and its
power generation business separated from its transmission
operations.

“The response to the disaster was botched because Tepco
exerts vast influence on politicians, government ministries, the
business world, the media and the academic community,” Koga
said in a memo published in May. Koga was forced to resign last
month after publishing his proposals.

The government won’t allow the utility to go bankrupt
because creditors and stockholders would get paid off before
people suffering from the nuclear accident, Minister of Trade,
Economy and Industry Yukio Edano said.

“If we drive Tepco into bankruptcy, victims’ claims for
damages from the nuclear accident wouldn’t be met,” Edano said
in an interview on Sept. 15.

Critical Issue

A more critical issue facing the industry is that utilities
are unlikely to be able to build any more plants, says Tahara,
author of the book on Tepco’s history.

“The crisis has made people question nuclear power for the
first time since the end of the war,” he said. “Japan won’t be
able to build new nuclear reactors in the next decade or two.”

The Fukushima crisis has changed the concept of the nuclear
community. Utilities need approval from towns within about 4
kilometers of a planned nuclear plant. The contamination around
Fukushima spread further and that means operators will find it
impossible to get support from a larger number of towns and
residents, Tahara said.

That rings true in Yamafunyu, the childhood home of Tepco’s
Kikawada, where his “deal with the devil” ultimately rained
radiation upon his elementary school. The backhoe began the two-
week job of removing soil from the school playground on Aug. 24,
a day before 21 students, including two evacuated from an area
closer to the plant, returned to classes.

Yamaki -- who stopped looking after the Kikawada family’s
grave three years ago because of age -- said the hamlet, now
part of the city of Date, is suffering from the radiation
without benefiting from Dai-Ichi. The jobs and wealth from the
nuclear donut didn’t extend far enough inland.

“There must be a lot of other ways to generate
electricity, like solar,” he said. “They should stop using
nuclear power if it causes a tragedy like this.”